Archive for April, 2009
26.04.09 HMRC issue revised guidance to MSB’s
Posted by: BTC in AML Legislation updates, HMRC News and Guidance on April 26th, 2009
This guidance is being sent to Money Service Businesses (MSBs) with a copy of the first direction issued under the Counter Terrorism Act 2008 Schedule 7 which affects them and will shortly be included in Public Notice MLR8: Preventing money laundering and terrorist financing.
Who is this guidance for?
This guidance is for MSBs supervised by HM Revenue & Customs (HMRC).
Purpose of this guidance. The purpose of this guidance is to provide MSBs that are supervised by HMRC with comprehensive guidance on complying with directions issued by HM Treasury (HMT) under the Counter Terrorism Act 2008 Schedule 7
The guidance:
• Outlines the legislation in the Counter Terrorism Act 2008 Schedule 7
• Explains the requirements of the Counter Terrorism Act 2008 Schedule 7 in relation to MSBs and how these should be applied in practice
• Explains the link between these requirements and those under the Money Laundering Regulations (MLR) 2007
The Counter Terrorism Act 2008 Schedule 7
Schedule 7 of this Act:
• addresses the risks from money laundering, terrorist financing and the proliferation of nuclear, radiological, biological or chemical weapons
• gives new powers to HMT to issue directions to firms in the financial sector including MSBs
• requires MSBs to comply with directions issued by HMT
• appoints HMRC as an enforcement authority and gives new powers to HMRC to supervise MSBs to ensure their compliance with the requirements imposed by any direction
What is a direction?
A direction will contain specific legal requirements imposed by HMT on businesses in the financial sector in relation to their transactions or business with:
• a person carrying on business in a country
• the government of a country
• a person resident or incorporated in a country
The requirements may be imposed on particular businesses in the financial sector, a category of businesses, or all businesses in the financial sector.
When can HM Treasury issue a direction under the Counter Terrorism Act Schedule 7?
HMT may give a direction if one or more of the following conditions is met in relation to a country outside the European Economic Area (EAA.)?
The Financial Action Task Force (FATF) has advised that measures should be taken in relation to the country because of the risk of terrorist financing or money laundering activities being carried on
- in the country
- by the government of the country
- by persons resident or incorporated in the country
HMT reasonably believes that there is a risk of terrorist financing or money laundering activities being carried on:
- in the country
- by the government of the country
- by persons resident or incorporated in the country
and that this poses a significant risk to the national interests of the UK
HMT reasonably believes that:
• the development or production of nuclear, radiological, biological or chemical weapons in the country
• or the doing in the country of anything that facilitates the development or production of any such weapons poses a significant risk to the national interests of the UK.
What is The Financial Action Task Force (FATF)?
FATF is an inter-governmental body which develops international standards to combat money laundering and terrorist financing. It also produces lists of countries that do not have sufficient legal and regulatory standards to combat money laundering and terrorist financing.
How will HM Treasury issue a direction?
HMT may issue a direction to a particular firm following a ministerial decision. In such cases it will communicate directly with the firm.
When a direction is issued to more than one firm, HMT will lay an order before parliament.
How often will directions be issued?
Directions can only be issued to counter significant threats from high risk jurisdictions and so will not be used frequently.
How long will a direction last?
A direction will last for one year. However, it may be withdrawn before this time.
Will HM Treasury take account of the impact on businesses when they issue a direction?
HMT has a duty to consider the proportionality of any direction, which includes the likely impact upon businesses.
When HMT gives a direction they will consider the administrative burdens it will impose on affected businesses and if possible will give businesses time to prepare.
Does HM Treasury have similar powers under the Money Laundering Regulations 2007 (MLR 2007)?
Under Regulation 18 of the MLR 2007 HMT can direct any relevant person
• not to enter into a business relationship
• not to carry out an occasional transaction
• not to proceed any further with a business relationship or occasional transaction
with a person who is situated or incorporated in a non-EEA state to which the FATF has decided to apply counter-measures. The powers to issue directions under the CT Act 2008 are broader, reflecting the range of counter measure options identified by the FATF. Under the CT Act 2008 HMT can issue directions where the FATF has only advised measures be taken and can only direct businesses operating in the financial sector. Under the MLR 2007 HMT can direct any relevant person, but only where the FATF has decided to apply counter measures.
What does this mean for MSBs?
HMT could issue directions to all MSBs, or to some types of MSBs or to a particular business. This means that you must be ready to deal with these directions by training your staff and including how to deal with them in your anti money laundering systems.
Will cheque cashers or bureaux de change be affected?
Cheque cashers and bureaux de change are MSBs and therefore fall within the scope of the Counter Terrorism Act. Directions may specify some or all types of MSB, but as the purpose of any direction will be to prevent the flow of money to and from the countries affected it is unlikely that cheque cashers or bureaux de change will be affected. Despite this they should always include how to deal with any directions in their anti money laundering polices and processes and sign up to the email alert system.
What will a direction say?
Directions can impose a range of requirements on a business in relation to their transactions or business with the targeted country or institution:
• enhanced due diligence
• enhanced ongoing monitoring
• systematic reporting
• limiting or ceasing business
The requirements to carry out enhanced customer due diligence and ongoing monitoring are in line with similar requirements under the MLR 2007. The requirements for systematic reporting and limiting or ceasing business are new.
What will I have to do?
Specific guidance will be issued with each direction and you will need to read the conditions imposed very carefully to find out what you need to do.
You will have to identify the customers or transactions that are affected and may need to carry out more detailed checks on them.
You may need to do one or more of the following:
• Carry out enhanced customer due diligence (see MLR 8 para. 7.12). You would normally do this in high risk situations such as when the customer is a politically exposed person.
• Carry out ongoing monitoring of customers in a business relationship (see MLR 8 Part 9). This is the kind of monitoring you would normally do in high risk situations.
• Report all transactions with these people and organisations. You may need to do this weekly.
• Cease or limit business with certain people and organisations.
If I have to impose additional requirements will I ‘tip off’ my customers?
There is no tipping off offence under the Counter Terrorism Act. The tipping off offences under the Proceeds of Crime Act and Terrorism Act will not apply when businesses identify affected transactions and carry out any of the four requirements.
Will there be any threshold for applying enhanced customer due diligence for affected transactions?
There will be no threshold for requiring enhanced customer due diligence unless this is specified in the direction.
What if I have to cease business with certain people or organisations?
Within the time set out in the direction you must not do business with the people or organisations specified. HMT may grant a licence to exempt certain transactions or types of transaction from the requirements of the direction. Either your customers or you can apply for a licence. HMT will provide further information on how to apply for licences when they issue a direction.
What will happen to the money if I have to stop a transaction?
Preferably, the money should be refused before a transaction can be started. HMT will issue specific guidance with each direction on what to do with transactions that are underway.
How will I carry out systematic reporting?
HMT will explain in each direction what information should be provided about transactions and business including where and when the documents and information should be sent.
Should I continue to submit Suspicious Activity Reports (SARs) in relation to these transactions and business?
Yes, you should continue to submit SARs where necessary alongside systematic reporting.
How will I know that a direction has been issued?
All MSBs should sign up to HM Treasury’s email alert system to receive copies of any directions. HMT will put an announcement on their web site and issue a press statement when they issue a direction and HMRC will put an announcement on their Money Laundering Regulations web site and may contact affected businesses by a mail shot where this is possible.
Will branches of my business based outside the UK be affected?
Yes the direction will apply to all branches of your business within the EEA but not to any subsidiaries legally incorporated in another jurisdiction.
Will the directions list the individuals within a business that I should not deal with?
No, where you are required to limit or cease business with another business or organisation the directions will identify the organisation or business only. Although individuals will not be named in order to comply with the requirements of the direction, you should not deal with any representative of the business or organisation.
What are the sanctions for non- compliance?
There are civil and criminal sanctions for failure to comply with the Counter Terrorism Act 2008 Schedule 7. These include unlimited fines and imprisonment for up to two years.
How will HMRC supervise compliance with the Counter Terrorism Act 2008?
We will integrate monitoring compliance with the Counter Terrorism Act into our existing risk based approach to compliance with the MLR 2007 and Transfer of Funds Regulations 2007.
How will this effect the assessment of customers and products under the MLR 2007?
Customers that are carrying out transactions or business with countries where the FATF has highlighted deficiencies in systems to prevent money laundering and terrorist financing, will be high risk. Where the MLRs require customer due diligence measures to be applied they should be subject to enhanced due diligence and enhanced monitoring even if HMT has not issued any formal direction.
Appendix 1
What countries are included in the European Economic Area EEA?
Austria, Belgium, Bulgaria, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom. Iceland, Liechtenstein and Norway are EEA member states, but they are not members of the European Union (EU). Gibraltar is within the EAA.
What countries are not included in the EEA?
Any country that is not listed above including Switzerland which is not a member of the EU or the EEA. The Channel Islands and the Isle of Man are not part of the UK, EU or the EEA.
Visit the BTC website for compliance help and support for firms in the regulated sector.
22.04.09 MLR – acting for family members
Posted by: BTC in General Information & FAQ's on April 22nd, 2009
If you have known somebody as a close relative for 40 years do you still need to ID him before accepting instructions?
AccountingWEB.co.uk 22-Apr-2009
Common sense approach
This post assumes that you are acting for your friends and relatives’ by the way of businesses and not in just a ‘family’ capacity which was never designed to be a part of the ML Regulations, for example a wife doing the books for her husband who may be a plumber
The Regulations actually state “identifying the client and verifying the client’s identity on the basis of documents, data or information obtained from a reliable and independent source;” Nowhere in the Regulations states that you must have documentary evidence on any client.
Information may be in any form, including word of mouth or personal experience etc, someone you know and trust may confirm a clients identity, your mother may confirm that the gentleman you are acting for really is your father (hopefully), and indeed you have probably visited your mothers house so you have information as to the home address.
We already know that it is not in the public interest to prosecute a regulated person who may commit a trivial or technical breach of the Regulations, this has been stated by SOCA and other law enforcement agencies, so you will should not receive any penalty for not having a copy of your mothers’ passport, so an element of common sense prevails. So document that it is your father and you been to his house, this would suffice for any Supervisory staff who may ask, if it does not then I would suggest that the supervisor gets retrained.
The problem with friends and relatives is not the knowing of who they are, but are you independent enough to effectively ‘police’ them. For example, you act for your farther and you discovered you father was involved in drugs dealing, could you file a SAR on him? If you could not, you stand a very good chance of being investigated along side your relative for those offences since you are ‘aiding and betting’ by turning a blind eye, especially if you continue to act. You can choose who you act for, who you want to be friends with, but in some respects you cannot choose your relatives.
Do not forget that a risk assessment is mandatory for all clients, including your relatives; here you would document your policy of what you would do to mitigate any potential risk of loosing your independence because of your association with the client relative. For example, your firm may be the agent, but an independent member of staff may complete most of the initial work.
Steve O’Neill
Business Tax Centre
Visit the BTC website for compliance help and support for firms in the regulated sector.
14.04.09 Crime Pays: Cops Given £5.5m Of Seized Assets
Posted by: BTC in General News & Cases, SOCA - Latest News on April 14th, 2009
More than £5m of assets seized from criminals is to be handed to police across England and Wales, the Home Office has announced.
Half of the a total of £31.8m in criminal assets, confiscated between October and December last year, will be shared between police, prosecutors, courts and other bodies. Under an incentive scheme introduced in 2006, police and recovery agencies can keep half of the cash they seize from criminals.
The amount to be given to English and Welsh police forces is £5.5m, up from £5.14m during the same quarter in 2008. The remainder of the £15.9m will be shared by HM Revenue and Customs, the Serious Organised Crime Agency, the Crown Prosecution Service, the courts service and other local authorities.
More than £530m has been seized since 2003, when the Proceeds of Crime Act came into effect. Over £135m was recovered in the financial year 2007-2008.
Home Office Minister Vernon Coaker said the scheme “makes crime far less profitable” for criminals and helps the police force to fight crime.
He added: “Recovering more than £31m from criminals in the space of three months is a great achievement”.
“I want to thank the police and other partners for their hard work in seizing the money and undermining criminal gangs.”
Visit the BTC website for compliance help and support for firms in the regulated sector.
08.04.09 Liverpool drug gang hit with £140,000 Proceeds of Crime action by Serious and Organised Crime Agency
Posted by: BTC in General News & Cases, SOCA - Latest News on April 9th, 2009
A LIVERPOOL gang behind a massive Scottish drugs farm was stripped of thousands of pounds. John Fitzgibbon, 60, and Michael Fairhurst, 44, ran the sophisticated cannabis operation for more than two years. The Serious and Organised Crime Agency (SOCA) raided the farm on the north-east coast of Scotland in the spring of 2007. Officers took the pair and a third man, Richard Ford, 60, to Liverpool crown court to claw back as much money as possible using the Proceeds of Crime Act. The three were stripped of a total of almost £140,000 during the two-day hearing.
Ford, a Newcastle man, was caught handing a 2kg bag of heroin to Fitzgibbon and Fairhurst. He will now have to pay back the drug’s estimated street value of £37,891. Robert Altham, prosecuting, told the court he had not attended court and so he was liable to pay back its full value as well as £2,391 in his bank account and £120 on a credit card. The court also heard that SOCA had sold off Fitzgibbon and Fairhurst’s Scottish farm for £61,000. At its peak the the cannabis farm was capable of generating more than £1m a year.
When officers raided Little Cushnie farm the gang tried to destroy the evidence by setting fire to huge drums of cannabis. But their efforts were unsuccessful and SOCA was able to recover enough evidence to convict the gang. The pair, who also ran a drug pushing operation in Liverpool have also seen their cars impounded and sold off. The court heard that officers had seized a Toyota worth £3,500, a Ford Transit worth £1,000, a Peugeot valued at £3,900 and a Chevrolet worth £4,900. All the vehicles belonged to Fairhurst, of Stanley Park Avenue South, Anfield, and will now be sold off for an estimated total of £7,425.
Fitzgibbon, of Bellfield Crescent, Huyton, yesterday heard that the SOCA officers had seized a stash of drugs held in the cars worth £202,375 belonging to Fitzgibbon. The court also heard that Fitzgibbon, who is now serving a 13-and-a-half jail term for his part in the drug conspiracy, had laundered money by buying thousands of euros. He will now have to pay out about £40,000 and faces an additional 15 month jail term if he fails to pay. This means he either has to sell or remortgage his home to pay off the debt by October 6.
Meanwhile, two of Fitzgibbon and Fairhurst’s accomplices who worked as gardeners at the Scottish drug factory are serving 18 month jail terms. Wayne Nickson, 46, of David Street, Toxteth, and James Truman, 43, of Harefield Road, Speke, had both previously pleaded guilty to being concerned with the production of cannabis.
Visit the BTC website for compliance help and support for firms in the regulated sector.
